Next Steps in Shifting Pleading Standards for Patent Cases

Changing the Rules of Civil Procedure: The Federal Rules of Civil Procedure operate with the force of law, but their implementation procedure is unusual. In 1934, Congress adopted the Rules Enabling Act that shifts power in drafting the rules to the courts. The process starts with the Judicial Conference that proposes any rule changes. The Supreme Court can then vote to adopt the proposed changes. Congress did not fully abdicate its power. Rather the statute provides Congress the power to reject the Supreme Court’s proposed rules. The default, however, is that rules will become effective if Congress does nothing. Timing-wise, rules adopted by the Supreme Court by May 1 will become effective on December 1 of that same year.

Pleading Standards and R.84: In Iqbal and Twombly, the Supreme Court raised the standards required for pleadings (complaints, answers, etc) to now require that facts be pled sufficient to make relief plausible rather than mere conclusionsleading to conceivable relief. In the patent context, for instance, merely pleading that “defendant infringes the the ‘XYZ patent” would seemingly be insufficient without adding more factual context. However, Iqbal and Twombly have not been applied in the patent infringement context because the Rules include a special loophole known as Rule 84 and the Form Complaints. Basically, the rules of civil procedure include an appendix of form complaints that include Form 18 – a patent infringement complaint – and Rule 84 declares that complaints that follow the form will be deemed sufficient.

In many cases (but certainly not all), patentees provide bare-bones complaints that fail, for instance, to identify which products infringe which claims of which asserted patents. Some courts have adopted a requirement that such detail be provided in an early mandatory disclosure, but many courts delay that requirement for months.

Eliminating R 84 and the Form Complaints: The September 2014 Judicial Conference proposal would eliminate R.84 and the form complaints. The result then would be that patent infringement complaints would be judged under the higher standard of Iqbal and Twombly – just like all other federal cases.

Up to now, the Supreme Court has not adopted or otherwise acted on the proposal. Under the statute, the Court’s delay has no meaningful impact because it cannot be implemented until December 1 2015 at the earliest.

Supreme Court Racing against Congress: However, the Supreme Court is not operating in a vacuum. Rather Congress is also considering its own amendments to the rules that would go well beyond Iqbal and Twombly. Notably, the Goodlatte proposal would require that a patent infringement complaint identify with specificity how each limitation of each asserted claim is infringed by each accused instrumentality.

Supreme Court action here will largely serve to eliminate the demand for Congressional pleading reforms. I see that as strongly positive because of problematic features of the Goodlatte pleading proposal. However, time will tell which side wins this slow-motion race.

Requiring infringement contentions in the complaint in Hatch-Waxman litigation is probably unworkable, as generics don’t necessarily have to turn over all relevant portions of their ANDA before the complaint is filed — and often don’t, even with a confidentiality agreement in place.

I welcome any change that requires complaints for strict liability offenses require more than mere notice pleading.

I’ve read that some practitioners think that the change won’t matter much, as in practice, infringement contentions are often due fairly soon after service, I think it changes a few things:
1. Any 12(b)(6) motion is easier where the “facts” plead in the complaint are demonstrably false.
2. Infringement contentions in the complaint aren’t so easily buried and are actually part of the public record — so many times they’re merely exchanged between the parties.
3. In jurisdictions, amending complaints is not always a matter of right and any increase in what is claimed to infringe is going to be by motion with permission of the court on good showing.
4. It avoids undue expense of early attempts to try to divine what the plaintiffs actually believe infringes.

I see what you’re getting at. Here’s my point about the strict liability matters: but for the complaint, the accused infringer may not otherwise know what the infringement claim is about. Naked assertion of direct infringement without identification of the infringed claims or the alleged infringing goods or services is a huge waste of everyone’s time.

I assume under the other types of infringement, knowledge of the actual infringement is already a requirement and courts have already begun requiring a heightened pleading standard in those cases.

A heightened pleading standard for a strict liability cases makes lots of policy sense: the patent owner is telling the alleged wrong doer what the alleged wrongdoing is and what the source of that wrong doing. Current form pleading doesn’t do any of that: no claims, no products, no services, etc.

Courts applying Iqbal and Twombly have already heightened the pleading standard for indirect infringements because they have to show the knowledge elements. Whether it requires a particular pleading of alleged claims/products, the assumption is that the accused already knows something about the patents.

If you’re going to hold someone responsible for infringement without knowledge, you should at least be able to articulate with specificity where the liability is found and the facts that support that liability.

“I’ve read that some practitioners think that the change won’t matter much, as in practice, infringement contentions are often due fairly soon after service”

Apparently, these practitioners don’t practice in the District of Delaware or the Eastern District of Texas, which have by far the most patent-infringement cases of any districts across the country. In these courts, I have had many cases go more than a year before receiving infringement contentions because the courts don’t set a scheduling conference or issue a scheduling order for many, many months (in violation of the 120/90 day requirement of Fed. R. Civ. P. 16(b)(2)).

I believe we’re talking about Goodlatte’s Innovation Act. The summary of which states it:

“Requires the Supreme Court to eliminate the model patent infringement complaint form currently provided in the Federal Rules of Civil Procedure. Permits the Supreme Court to prescribe new model allegations that, at a minimum, notify accused infringers of: (1) the asserted claims, (2) the products or services accused of infringement, and (3) the plaintiff’s theory for how each accused product or service meets each limitation of each asserted claim.”

If you look at history of similar proposals, like in securities litigation, you would know this is incorrect. The modest proposal to eliminate Form 18 does not come anywhere close to the Congressionally-mandated pleading standard that is being proposed. The reason is simple–even if Form 18 is eliminated, you will have decades of judicial gloss saying that pleadings have to be interpreted in favor of the pleader, that all inferences are drawn in favor of the pleader, and that the most basic purpose is just to provide “notice.” It’s not clear, for example, that Form 18 would require an actual limitation-by-limitation analysis in the Complaint.

All of those principles and ambiguities, and the significant discretion district courts have to sustain pleadings, would remain under a regime of Twiqbal without Form 18 — but not under the proposed statute.

History has shown that when Congress steps in to mandate pleading requirements, a lot of these principles go out the window because you have a legislative policy that supplants the default “notice pleading” purposes of the Rule. This is exactly what happened with securities litigation when Congress passed the Securities Litigation Reform Act of 1995, which has a lot of parallels to the proposal here.

Commented upon previously was the contradictory reasoning given in the judicial process for removing Form 18 (something along the lines that the Form’s goals have been met, everything is hunky-dory and the form is just not needed, which does not sit with a “need” for augmenting the requirements).

I find it interesting that the Rules eliminate mandamus and scire facias writs. There is a lot of litigation going on right now about the ultra vires actions of the PTO in various post grant reviews. They are now being filed under the APA, which is not entirely apt.